FINANCIAL STATEMENTS - Mewah Group

MEWAH INTERNATIONAL INC.NOTES TOTHE FINANCIAL STATEMENTSFor the financial year ended 31 December 20122. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)2.15 Leases (continued)(b) When the Group is the lessor:2.16 InventoriesLessor - Operating leasesLeases where the Group retains substantially all risks and rewards incidental to ownership are classified as operating leases.Rental income from operating leases (net of any incentives given to the lessees) is recognised in profit or loss on a straight-linebasis over the lease term.Initial direct costs incurred by the Group in negotiating and arranging operating leases are added to the carrying amount ofthe leased assets and recognised as an expense in profit or loss over the lease term on the same basis as the lease income.Contingent rents are recognised as income in profit or loss when earned.Inventories are carried at the lower of cost and net realisable value. Cost is determined on weighted average basis. The cost offinished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production overheads(based on normal operating capacity) but excludes borrowing costs. Stores, spares and consumables are stated at cost and aredetermined on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, lessthe estimated costs of completion and applicable variable selling expenses.2.17 Income taxesCurrent income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the taxauthorities, using the tax rates and tax laws that have been enacted or substantively enacted by the statement of financial positiondate.Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and theircarrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill oran asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss atthe time of the transaction.A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries and associatedcompanies, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable thatthe temporary difference will not reverse in the foreseeable future.A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against whichthe deductible temporary differences and tax losses can be utilised.62